Problem set 3

1. On measuring benefits and costs

a. In order to protect the quality of its nearby water source, a community places a restriction on any housing development closer than 100 feet to a wetland. How might you estimate the potential costs of this regulation? The potential benefits?

b. What is the most you would be willing to contribute in a one time payment to for the return of the passenger pigeon? What is the least you would accept in a one-time payment for the loss of the white-crowned pigeon? Explain the nature of your answers: why are they different (or possibly the same)?

c. Suppose that there is a 1 in 1000 chance that a snake will bite you while you are walking to school, and that if you are bitten you will certainly die unless you are carrying an anti-venom with you at the time. What is the most you would be willing to pay for a dose of this anti-venom? What does that tell you about your valuation of a statistical life?

2. The EPI Briefing Paper that we read for class purports to show that Obama EPA Rules have, in just about every case, had a relatively high benefit-cost ratio.

a. As an economics researcher, how would you go about verifying the results of this study? Specifically, what data would you need to collect to check their results?

b. Based on your own research, what aspect(s) of this study do you find most convincing? What aspects do you find to be least convincing? Justify your answers.

3. Two conclusions that many environmentalists tend to take at face value are regarding GMOs – ‘They harm the environment!- and DDT – ‘It should be banned, in all cases!’

a. Using our benefit-cost perspective, what data would you need to collect to assess whether the application of GMOs should be promoted in some cases and whether DDT should be banned in all cases? What data, if any, would help you resolve the uncertainties associated with each of these propositions?

b. Based on material that you have found, make your own case about one of these propositions. Carefully justify your answer.